The sales calculator is a simple tool that helps you figure out what net sales is when you know the gross sales or a certain amount of products sold over a given interval at a set price. As a matter of choice, you can determine any value by setting the other variables.
Besides, if you read further, we explain how to calculate net sales, what the net sales formula is, and the difference between gross sales vs. net sales. That's why we also answer "What is gross sales?" using the gross sales formula.
What is net sales? What is gross sales?
In short, net sales is the remainder after all sales returns, allowances, and sales discounts have been deducted from the gross sales (or gross revenue).
A business' sales represent the sum of payments received for selling products or services. But companies do not immediately receive all of their sales in cash. The final amount of received payments may not reflect the invoices sent to customers.
How could that happen?
Adjustments, such as sales returns, allowances, and discounts, may reduce the total sales gross sales or gross revenue, so the received money is less than the initial sum. Good thing we have our return on sales calculator and our discount calculator if you need to calculate these parameters.
How to use the sales calculator?
This calculator is straightforward to use, as you only need to input all the data you know, and we will compute the rest immediately. Remember that you don't have to fill in the fields from top to bottom! Our sales calculator works in several directions; give it a try.
If you still have doubts about how to find net sales, keep reading. Below, we explain all the terms that appear in the calculator.
How to calculate net sales? - What is the net sales formula?
So, how to find net sales? Following the definition of net sales presented above, the net sales formula takes the following form:
net sales = gross sales - (sales returns + allowances + sales discounts),
where the gross sales formula is:
gross sales (gross revenue) = number of products sold within a given interval * price of the products
We divided our sales calculator into several fields that may help you if you are struggling with how to calculate net sales. These are:
In retail, companies often allow customers to return a bought item within a specified period for a full refund.
Allowance may occur when a buyer negotiates to lower the price of revenue that has already been booked. It might result from goods damaged during transportation or the incorrect product being sent due to an inaccurate record of the order. As a result, the seller may provide the buyer with a partial refund.
A discount may arise, for example, when a business would like to improve its cash-flow by offering a price reduction for buyers paying their bills early.
In each case, the seller needs to debit a sales returns and allowances/sales discount account and credit an asset account. This journal entry carries over to the income statement as a reduction in revenue.
For example, if a producer sells 100 notebooks in a month at an average price of $200, its gross sales will be $20,000. The company, however, has five defective machines returned, and so gives discounts of $500. Besides, after a negotiation with a buyer, it provides a partial refund of $300.
Relying on the net sales formula and gross sales formula, the producer would receive the following amount:
net sales = $20,000 gross sales – (5 * $200 sales returns + $500 sales discount + $300 sales allowances = $18,200.
Gross sales vs. net sales
Now you should at least be comfortable with what gross sales are and how to find net sales. To fully understand the difference between gross sales vs net sales, we prepared an additional description below.
Gross sales are the total of a business' sale transactions within a given period. However, net sales are the payments that are actually received after deducting the costs of goods sold, sales allowances, sales discounts, and sales returns from gross sales. The gross sales, therefore, the total sales before any adjustments.
Costs associated with net sales will affect a company's gross profit and gross profit margin, but net sales do not include cost of goods sold, which is usually the primary driver of gross profit margins.
Usually, net sales is the total amount of revenue reported by a company on its income statement, which means that all forms of sales and related deductions are combined into one line item. We should show gross sales in a separate line item than net sales as there can be substantial deductions from gross sales.